Trade Experts Ask: Is Mexico Immigration Tariff Just a Threat?

The Trump administration, furious that Central American migrant asylum seekers continue to stream to the U.S., says that unless Mexico can "dramatically reduce or eliminate the number of illegal aliens" coming to the U.S., it will levy tariffs on all Mexican imports, starting June 10. The tariff will begin at 5 percent, go to 10 percent on July 1, and then increase by 5 percent each month until it reaches 25 percent on Oct. 1.

Mexico's Foreign Minister Marcelo Ebrard traveled to Washington May 31 to talk about Mexico's efforts to stem migration. Although the Mexican president in his letter to President Donald Trump May 30 said he wanted to cooperate with the U.S. on dealing with migrants, Ebrard sounded angry on Twitter. He said the way the U.S. is treating Mexico is unjust and it doesn't make economic sense for anyone. He noted that Mexico is the main trading partner for the U.S. "The migratory flow of Central America and other countries or the high consumption of narcotics [in the U.S.] is not the responsibility of Mexico," he wrote in Spanish.

Despite that tone, Jorge Guajardo, former Mexican ambassador to China and a former high-ranking Mexican diplomat in Texas, said, "A lot can be done to prevent this from happening." Guajardo, a senior director at McLarty Associates, said "Mexico needs to do more" and that Ebrard will come with proposals about what Mexico can do to get better enforcement at its southern border with Guatemala.

When asked if Trump would back down before ever implementing the tariffs -- as he did with threats to shut down the border -- Guajardo said, “As of today that would be my wager, yes.”

Valeria Moy, a fellow at the Atlantic Council's Adrienne Arsht Latin America Center, and a Mexico resident, said on a conference call with reporters: "I am hopeful this is just a threat. The thing is, when you make a threat this high, it’s difficult to go back. To be honest, I don’t know what more Mexico could do to stop migration."

Even the administration, despite the harsh tone of the proclamation, left open the door to avoiding tariffs. Acting White House Chief of Staff Mick Mulvaney, speaking to reporters on a conference call May 30, said, "We actually have some level of confidence that the Mexican government will be able to help us in a very, very timely fashion."

Stephen Claeys, a partner at Wiley Rein and former House Republican trade staffer, said, "I can definitely envision something being worked out."

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, issued a statement on the threat, saying, "I support nearly every one of President Trump’s immigration policies, but this is not one of them. I urge the president to consider other options."

Sen. Joni Ernst, R-Iowa, said, "If the president goes through with this, I’m afraid progress to get this [revised NAFTA] trade agreement across the finish line will be stifled. While I support the need for comprehensive border security and a permanent fix to illegal immigration, this isn’t the right path forward."

Claeys said free-trade advocates shouldn't expect dozens of Republican senators to join the two from Iowa in pushing back on this plan. "They’re in a tough position politically," he said, "Having it being so directly linked with immigration puts them in a bind in being able to criticize the president.... As a result, it’s going to tamp down their criticism of what the president’s doing. Probably even more so [with] the political considerations they have to take into account than being critical of the [Section] 232 tariffs."

Sen. Pat Toomey, R-Pa., the author of the toughest bill aimed at reining in the president's authority under Section 232, said, "The president’s use of tax hikes on Americans as a tool to affect change in Mexican policy is misguided. It is past time for Congress to step up and reassert its Constitutional responsibility on tariffs.” Grassley also said the proposal is a misuse of presidential authority on tariffs.

Democrats, too, criticized the announcement. House Small Business Committee Chairwoman Nydia Velázquez, D-N.Y., said, "using tariffs to push this Administration’s anti-immigrant agenda is appalling and an abuse of the President’s power. "

Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, wrote, "A few weeks after the Trump administration suggested that foreign cars represent a national security threat, it claims that asylum seekers from Latin America are, too, and that making Americans pay higher tariffs will somehow get what he wants. Yet, Donald Trump refuses to counter Russian meddling in American elections and he's cozied up to the presidents of authoritarian Russia and North Korea."

If the tariffs do go into effect, consumers will not notice the first wave at 5 percent, according to Bart Oosterveld, director of the Atlantic Council's Global Business and Economics Program. Oosterveld said the peso depreciated 4 percent on the threat, so that cancels out the tariff.

But experts said the sudden move against Mexico -- just when it was beginning to move ratification of the new NAFTA, and contrary to the existing free-trade agreement -- could mean that other trade conflicts are here to stay.

Neil Bradley, chief policy officer at the Chamber of Commerce, said the rest of the world is watching what Trump does. "At some point that begins to weaken your ability to negotiate good deals around the world," he said.

Guajardo was blunter. "The Chinese can see Mexicans made concessions and both countries end up with the same result," he said -- tariffs on all their exports to the U.S. He said China's view of Mexico renegotiating NAFTA is: "look what that got them."

"Here’s who's sitting pretty -- Xi Jinping. He was coming under pressure internally from members of the Communist party," Guajardo said, that the Chinese president misjudged the Trump administration's willingness to confront China if it backed away from concessions. "He can go back to whoever are his adversaries in the government" now, Guajardo said, and say, "They are not negotiating in good faith. At least I stood up for China."

Both Guajardo and Moy said the provocation will not jeopardize Mexican ratification of the U.S.-Mexico-Canada Agreement. But Guajardo said Trump is showing it's not worth the paper it's written on.